Is this the pullback you’ve been waiting for?

It has been 47 trading days since SPX posted its last 3-day pullback. That is a long time. And it is especially long considering SPX is still below its 200ma. Should SPX fail to rally out of this early hole this morning, we will finally see the 1st 3-day pullback since March 9th. Bulls could look at it and exclaim “Finally, the 3-day pullback I have been waiting for to load up!”. Bears might be saying “This signals a change in behavior. Watch out below!”. Quants say, “Let’s see how similar setups have done in the past.” That’s where I generally fall. So let’s check it out.

SPX 1st 3-day pullback in 45 days

Only 6 instances in the last 90+ years. Results mixed. Tough to get excited about these results. I also loosened the criteria to see what happened if we only required a 35-day streak.

SPX 1st 3-day pullback in 35 days

Still just 11 instances. Still not terribly exciting for either the bulls or the bears. So the study was a bit of a flop, but I thought the concept was interesting enough to share. I’ll be looking for other evidence to help formulate my bias.



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